Exchange of Information requests to British Virgin Islands (BVI)

News and Press Release - Dated:- 17-5-2016 - F.No.500/12/2013-FT&TR-III Government of India Ministry of Finance Department of Revenue (Foreign Tax & Tax Research Division) Dated: 12th May 2016 To, All Pr.CCsIT/DGsIT(Inv.) Madam/Sir, Subject: -reg.- British Virgin Islands (BVI) is one of the most important jurisdictions for India from the point of Exchange of Information (EOI) relationship. Over the past few years, India has sent several EOI requests to BVI under the India-BVI Tax Informa .....

, the following must be kept in mind by the field officers while making EOI requests:- 2.1 Procedure for incorporating a company in the BVI: 2.1.1 Any person who wishes to form a registered company in BVI must do so through a licensed Registration Agent (RA). The agent is required (amongst other things) to obtain client due diligence (CDD also sometimes referred to as know your client or KYC) to comply with the regulations. 2.1.2 There are more than 100 registered agents in BVI who provide compa .....

slands, Hong Kong, Mauritius etc. The concerned BVI entity of the group is Portcullis TrustNet (BVI) Limited. Another service provider is Fidelity Corporate Services. As stated above, there are more than 100 such service providers. 2.1.3 The RA must properly identify and know the client and the beneficial owner(s) of the new company as per the requirement of law and the conditions of the Company Management License. Therefore, before the RA proceed with a new incorporation for any first-time clie .....

any incorporation documents for a Business Company. In order to comply with the minimum domestic presence requirements in the BVI, RA provides a Registered Address and Registered Agent service for the client s new company. 2.1.4 Field officers may keep the above procedure in mind while making a request for information relating to a BVI company. 2.2 Shareholding of BVI Companies: 2.2.1 Companies in BVI are not required to state their authorized capital. They need to simply state the number of sha .....

al, or to pay it in by a certain deadline. 2.2.2 The details of shareholders of the company are not publically available. The law in BVI only requires that the shareholder information (Register of Shareholders) must be kept on file with the Registered Agent, where it is confidential and accessible only by the members of the company. However, the law also allows for the shareholder information to be filed with the Registry of Companies as an option - if the shareholders so want. 2.2.3 A very impo .....

nd directorship services are Execorp Limited, Shrecorp Limited etc. In such cases, there may an agreement/correspondence between actual owner/beneficial owner and nominee shareholders. Therefore, while making an EOI request, it may be essential to seek information about beneficial ownerships with underlying documents. 2.3 Directors of BVI Companies: 2.3.1 In the BVI, Business Companies need to have a minimum of one director, either a private individual or a corporate entity, which may be residen .....

ormation is made either to the company concerned or any other authority believed to be in possession of the information sought. BVI authorities can proceed with the EOI request only when they are able to identify the company from their database. Therefore, it is necessary that the name of the company as well as the company number should be correctly identified in the EOI proforma. Further, name of the BVI entity must also be carefully written in the EOI Request to avoid any spelling errors. 2.4. .....

2.5.1 In the Proforma for sending EOI Request, there is Row Number 8 in which the option Request to refrain from notifying the taxpayer involved has to be filled up. It has been observed that in many cases field officers exercise this option and tick Yes without giving detailed justification for the same. 2.5.2 Under the laws of certain countries/jurisdictions, the taxpayer or the holder of the information has certain rights including a right to be informed or notified that a request for informa .....

supply of information or the prior notification is likely to undermine the success of the investigation being conducted. 2.5.3 A request to refrain from notifying the taxpayer should not be made in a routine manner and such request should be made only if it is essential and can be justified on the basis of documentary evidences. The reason that the taxpayer concerned is likely to file an appeal against the supply of information would generally not be a valid reason for making such a request. 2. .....

le property etc. are generally not readily available with tax authorities. Therefore, this option should only be exercised only in exceptional cases. 2.6 Demonstrating Foreseeable Relevance : 2.6.1 Under the TIEA between India and the BVI, the Competent Authorities are obliged to exchange information which is foreseeably relevant for administration and enforcement of the domestic laws concerning taxes. The standard of foreseeable relevance requires that the requesting State provides an explanati .....

ly brought out and the relevance of information for the purposes of administration and enforcement of Indian tax laws is spelt out in sufficient detail. These details should be provided in Form A/Row 12 relating to relevant background . This will help the BVI authorities to provide the information requested, prevent legal challenges to proceedings in accessing information, if any, and will, therefore, obviate the need for further clarifications sought from the Indian authorities by BVI. 2.7 Larg .....

request may be considered as having been made in a casual and perfunctory manner and may not receive adequate attention by the BVI authorities. In a request with a long list of questions, information which is more critical may be missed out by BVI and therefore the useful information may not be received by us. Though BVI authorities may genuinely want to provide assistance, they may not be able to do so as they would need to collect the requested information from various sources, which they may .....

lways be requested through additional EOI requests. 3. Clarifications sought by BVI: 3.1 A large number of EOI requests are pending with the BVI and one of the main reasons for delay in receipt of information from BVI is that the clarifications sought by BVI are not provided in a timely manner. Such delays are viewed unfavourably by the BVI Competent Authority. Also, in such cases, requests are sometimes treated as closed by the BVI Competent Authority for want of clarifications, depriving us of .....

rom time to time, particularly in respect of pending BVI cases, and issue necessary directions to the Range/Unit Heads to ensure that the clarifications sought are provided in a timely manner. 4. Feedback in BVI cases: 4.1 It is also relevant to know how the information received from BVI (there are many such cases) has been actually utilized by the field authorities. In many cases, BVI has provided crucial ownership information including beneficial ownership information. However, field authoriti .....